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Asia Pacific is most improved region for real estate transparency

2016-06-30T05:00:00Z

Australia takes the top spot; Taiwan is biggest improver

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SINGAPORE, 30 June 2016 - Asia Pacific made the greatest progress globally in terms of real estate transparency over the past two years, according to JLL’s Global Real Estate Transparency Index (GRETI) 2016. The index measures transparency by looking at factors including data availability, governance, transaction processes, and the regulatory and legal environment.

Asia Pacific is a diverse region in terms of real estate transparency. Australia continues to hold the top spot as the region’s most transparent real estate market, and together with New Zealand, is classified as ‘Highly Transparent’.

Overall, improvements in most countries across the region have been small. The biggest improver in the latest survey is Taiwan, which has moved into the ‘Transparent’ category for the first time. More moderate improvements were achieved by Japan, South Korea, India and China, with China’s Alpha cities now on the cusp of the Transparent category. At the other end of the spectrum, Myanmar retains the title as the least transparent market in Asia Pacific, although it was amongst the ten biggest improvers globally.

The major factor driving improvements in Asia Pacific has been the increased availability and quality of market data. In some countries improvements have also been seen in regard to performance benchmarking, the enactment of new legislation, the introduction of higher ethical standards, and the wider adoption of ‘green building’ regulations and tools.

“These results are encouraging as they highlight the steady advance of the region’s real estate industry,” says Jeremy Kelly, director, Global Research Programmes at JLL and main author of the report “Taking Real Estate Transparency to the Next Level.”

The launch of GRETI 2016 comes at a time when international institutions, national governments and businesses are demanding greater integrity and clarity in investments and transactions. It reflects a growing recognition of the crucial role that a transparent real estate sector plays, not only as a facilitator of new investment and business activity but also, significantly, in community well-being and inclusiveness, according to the report.

Additionally, capital allocations to real estate are growing. JLL forecasts that within the next decade in excess of US$1 trillion will be targeting the sector globally, compared to US$700 billion now. This growth means investors are demanding further improvements in real estate transparency, expecting standards in real estate to be at least on a par with other asset classes.

“While the region as a whole has shown improvement, most countries in Asia Pacific are still not transparent. There are ongoing examples of poor corporate governance, opaque and corrupt practices and failures in regulatory enforcement that are resulting in serious consequences for society, for business activity and for investment,” says Dr Jane Murray, Head of Research, Asia Pacific.

“Looking ahead, the continued development of the region’s economies and real estate industry will fuel the need for future enhancements in transparency as investor interest rises and the demand for quality buildings and management grows. Regulatory reforms will be essential for further progress in transparency and although public sector initiatives are essential, private sector involvement will also be crucial.”

"Southeast Asia has the widest variation between the highest and lowest scoring country and this is largely expected given the wide divergence in economic and urban growth in the region from transparent Singapore to opaque Myanmar, " says Dr Chua Yang Liang, head of research for Southeast Asia. “For investors this also means that SEA offers a wide range of investment opportunity.”

JLL’s Transparency Index is updated biennially and has been charting the evolution of real estate transparency across the globe for 17 years. The latest survey covers 109 markets worldwide.

Key findings:

Australia and New Zealand

Australia ranked second globally behind the United Kingdom in the ‘Highly Transparent’ group of countries. The group consists of 10 countries, including Canada, United States and France, and accounts for 75 percent of global real estate investment. New Zealand takes the sixth spot.

Singapore and Hong Kong

Singapore (11th) takes the top spot in Asia in the ‘Transparent’ group. However, the city state and Hong Kong (15th) have not shown any significant improvement and once again have fallen just short of the ‘Highly Transparent’ category. Alignment of shareholders’ interests of listed vehicles in Hong Kong still requires improvement, while the depth of real estate data in Singapore trails many major global markets.

Taiwan

The region’s biggest improver, Taiwan (23rd), has seen marked progress on the back of the availability of data on market fundamentals and the transaction process. Policy changes, both new and old, are flowing through to gains in information availability and accuracy. In 2016, a consolidated housing and land tax was introduced which brought Taiwan in line with international standards and helped correct a flaw in the taxation system which saw declared land values often undervalued.

Japan and South Korea

In North Asia, advances in market intelligence have contributed to moderate improvements in transparency for Japan (19th) and South Korea (40th). Robust investor interest, both domestic and foreign, has led to increased demand for real estate information and encouraged more extensive tracking of property sectors by service providers including JLL.

China

Progress in China has been steady, with greatest advances being in Tier 1 Alpha cities (33rd). Shanghai, which is on the cusp of moving into the ‘Transparent’ category, is a city that is fast-tracking to maturity and witnessing a structural uplift in real estate investment, development and corporate activity. It has seen a threefold increase in real estate investment since 2010.

India

India’s key cities (36th) are benefiting from proactive measures to increase transparency in the real estate sector. Land records have started to be digitised and made available via an online database, while the Land Acquisition, Rehabilitation and Resettlement Act (passed in 2014) has simplified procedures for acquiring land and determining fair compensation for sellers.

Transparency Level

2016 Composite

Rank

Market

High

2

Australia

6

New Zealand

Transparent

11

Singapore

15

Hong Kong

19

Japan

23

Taiwan

28

Malaysia

Semi

33

China – Tier 1

36

India – Tier 1

38

Thailand

39

India – Tier 2

40

South Korea

45

Indonesia

46

Philippines

49

China – Tier 1.5

52

India – Tier 3

55

China – Tier 2

66

China – Tier 3

Low

68

Vietnam

69

Sri Lanka

70

Macau

Opaque

95

Myanmar

Source: JLL, LaSalle

About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

JLL has over 50 years of experience in Asia Pacific, with over 33,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. www.ap.jll.com.